Economic Reform, Democracy and Growth During Post-Communist Transition

Fidrmuc, Jan

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Economic Reform, Democracy and Growth During Post-Communist Transition

35 Pages Posted: 26 Apr 2001

See all articles by Jan Fidrmuc

Jan Fidrmuc

Brunel University - Department of Economics and Finance; University of Angers - Lille - Economics & Management (LEM) - Centre National de la Recherche Scientifique (UMR CNRS 8179); CESifo (Center for Economic Studies and Ifo Institute); Global Labor Organization (GLO); Institute for Strategy and Analysis, Government Office of the Slovak Republic

There are 2 versions of this paper

Date Written: April 2001

Abstract

This Paper explores interactions between growth, economic liberalization and democratization during transition. The results can be summarized as follows: (1) Liberalization has a strong positive effect on growth during transition. This holds also when controlling for possible endogeneity of liberalization in growth. (2) Democracy encourages liberalization-countries which introduced greater democracy subsequently progress further in economic liberalization too. (3) Because of its reinforcing effect on liberalization, democracy has a positive overall impact on growth. Nevertheless, the marginal effect of democracy (after controlling for progress in economic liberalization) is negative during early transition. (4) The progress in democratization in turn depends on past economic performance in a surprising manner-the relationship between past growth and subsequent democracy appears negative. (5) Economic performance is an important determinant of electoral outcomes and, in particular, of support for reforms.

Keywords: Democracy, economic performance, elections, liberalization

JEL Classification: E63, O11, P26, P27

Suggested Citation: Suggested Citation

Fidrmuc, Jan and Fidrmuc, Jan, Economic Reform, Democracy and Growth During Post-Communist Transition (April 2001). Available at SSRN: https://ssrn.com/abstract=267275